Trade Gap Surges, Mexico Overtakes Japan for 2017: Placing the Blame

The trade gap widened much more than expected in December. Imports and exports rose, with imports rising far more.

In what's likely to negatively impact the next revision to fourth-quarter GDP estimates, the BEA's report on International Trade for December shows the trade deficit widened sharply thanks to surging imports.

The deficit was larger than any Econoday economists' estimate. The consensus was -$51.9 billion in a range of -$51.2 billion to -$52.7 billion.

3 Month Moving Average

Those looking for an acceleration in something cannot point to wages but they can point to trade deficits. The trade imbalance for the month surged to $53.1 billion.

2017 Summary

2017 Exports vs Imports

For 2017, the goods and services deficit was $566.0 billion, up $61.2 billion from $504.8 billion in 2016. Exports were $2,329.3 billion in 2017, up $121.2 billion from 2016. Imports were $2,895.3 billion in 2017, up $182.5 billion from 2016.

Pretty bad stats, but not surprising. Very few people I know give a hoot about where the products they buy are made. I know, people want the best deal, but for CRAP made in China no price is cheap enough.

Mish -- you have many pertinent insights, but why do you keep going back to an event in 1971 to explain an explosion in the trade deficit a quarter of a century later? There are graphs (sorry, can't link) showing the exponential growth in laws & regulations since the founding of the Environmental Protection Agency in the 1970s. Might that also be part of the explanation for the offshoring of US industry and the consequent trade deficits? After all, the link between a currency backed by gold and trade balances seems somewhat questionable. China, Mexico, Japan, Europe -- none of them have gold-backed currencies, and yet they manage to run trade surpluses with the US. I am all in favor of currencies which can't be messed around by the vile Political Class -- but we also need to look very critically at the cost/benefit ratios of the last 40+ years of increasingly intrusive regulations. (My apologies for the lack of paragraphs -- the comment system is not exactly user-friendly).

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It is also notable that most governments run deficits -- spending more than they take in. Certainly, Japan & Germany are in that category. Yet they run trade surpluses despite running budget deficits. There are clearly many factors involved in the performance of any economy -- but the damaging effects of over-regulation must be high on the list.